$191b in COVID funds may have been misspent

When the US Congress first passed the CARE act in response to the COVID-19 emergency, states and the federal government were so eager to push money out the door that for the first nine months one could claim unemployment insurance (UI) by just doing a self-certification without any verification of documents by the government or anyone.

That created a gigantic jackpot for fraud and led to the biggest loss of taxpayers’ money in US history, according to a hearing on Wednesday convened by US Representative Jason Smith, a Missouri Republican and chairman of the House Ways and Means Committee.

An estimated $191 billion out of the more than $880 billion in the UI fund has been misspent since 2020, Inspector General Larry Turner of the Labor Department told the committee. And that is possibly on the low end of the estimate and the potential loss could be more, said Turner. Last year, he estimated that at least $163 billion could have been improperly distributed since the onset of coronavirus in the US.

Turner said the Office of the Inspector General (OIG) issued UI assistance money when self-certification took place in the first nine months. “There was no kind of verification required to say that you deserve those payments,” he said, adding that it made the program a value target for fraud.

Gene Dodaro, the comptroller general and head of the Government Accountability Office (GAO), said that the OIG wasn’t prepared for the emergency. The government branch was slow to update an antiquated IT system.

“When the self-certification regulation was rectified in December 2020, it was already too late,” Dodaro said.

Turner said that those involved in the fraud ranged from inmates, street gangs and businesspeople to international organized crime groups. The US taxpayers’ money was up for anyone to grab.

Smith said that so far that OIG has filed more than 700 cases charging more than 1,200 people, resulting in more than 500 convictions.

OIG also enlisted help from international partners to pursue organized crimes related to UI fraud, Turner said.

The statute of limitations for prosecuting fraud cases is five years and will expire in 2025.

In his State of the Union address Tuesday, President Joe Biden called on lawmakers to double identity fraud crimes so that prosecutors could nail the “criminal syndicates” responsible for ripping off taxpayers.

Turner said that the loss included some checks that were sent to deceased people or in duplicates.

He said perpetrators filed multiple claims in different states. In other cases, people’s identities were stolen to claim fake benefits.

In one case, claims were filed in 42 states by one individual, said Turner. The payments were issued in debit cards, which were equivalent to cash. That made it hard to track the money and get it back.

Government documentation showed that Konstantinos Zarkadas, a Long Island physician, was able to easily receive 11 different benefits filed under bogus identities for approximately $3.7 million between March to July 2020.

Don Cisternino from New York was able to obtain $7.2 million from the government by forging W-2 and tax returns.